News & Insights


January 13, 2020

Health Headlines – January 13, 2020

GAO Report Claims 340B Program Needs More Oversight of Hospitals On January 10, 2020, the U.S. Government Accountability Office (GAO) issued a report claiming that the Health Resources and Services Administration (HRSA) does not use adequate controls to confirm the eligibility of private hospitals that participate in the 340B Drug Pricing Program (340B Program).  Specifically, the GAO claims vulnerabilities in HRSA’s processes for (1) verifying the nonprofit status of participating private hospitals and (2) confirming that the hospitals have entered into contracts with state or local governments to serve a low-income population. However, GAO’s reviews found that more than 90 percent of audited hospitals met these requirements.

Private hospitals can qualify to participate in the 340B Program if, among other requirements, they are nonprofit and have contracts in place with state or local governments to serve low-income patients who are not eligible for Medicare or Medicaid. Private hospitals account for over two-thirds of current 340B Program participants. 

Hospitals seeking to participate in the 340B Program must submit an application to HRSA.  At Congress’s request, the GAO examined HRSA’s processes for determining the eligibility of private hospitals that apply for participation in the 340B Program. 

The GAO claims that HRSA relies on unreliable data to verify the nonprofit status of private hospitals applying to the 340B Program. HRSA uses Medicare cost report data from CMS to determine nonprofit status. CMS told the GAO that the question on the cost report used to collect this data was not intended to assess nonprofit status, and CMS does not audit the data to confirm that hospitals identified as nonprofit are, in fact, nonprofit. 

The GAO also identified weaknesses in HRSA’s process for reviewing the contracts that participating private hospitals must have in place with state or local governments to serve low-income patients. HRSA relies primarily on self-attestations to verify that private hospitals have such contracts, which the GAO observed “is contrary to federal internal control standards.”

GAO claimed that about seven percent of the contracts HRSA reviewed in 2017 and 2018 did not appear to meet what GAO believes is the common definition of contracts. Second, the GAO claims that five percent of the contracts audited by HRSA in 2017 and 2018 did not require the hospital to serve the low-income population. Third, HRSA has allowed hospitals to avoid adverse audit findings by entering into contracts with retroactive effective dates. 

Last year, Congress introduced several bills to reform the 340B Program.  In 2018, a bill was introduced that would require participating private hospitals to submit reports on low-income individuals’ use of outpatient hospital services. The bill is available here

Reporter, Alek Pivec, Washington, D.C., +1 202 626 2914,

DOJ Reports More Than $3 Billion Recovered from False Claims Act Cases in Fiscal Year 2019 – On January 9, 2020, DOJ announced it recovered more than $3 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending September 30, 2019.  DOJ reports that $2.6 billion of those recoveries related to matters that involved the healthcare industry, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians.  Both the overall recoveries and healthcare industry recoveries represent an increase over last year; in fiscal year 2018, DOJ reported more than $2.8 billion in recoveries, $2.5 billion of which related to healthcare industry matters.

DOJ also reported that more than $2.1 billion of the recoveries arose from lawsuits filed under the qui tam provisions of the False Claims Act.  A total of 633 qui tam suits were filed this past year – representing an average of more than 12 new cases every week.

DOJ reiterated its continuing commitment to using the False Claims Act and other civil remedies to redress fraud by holding individuals accountable.  DOJ cited a number of settlements in fiscal year 2019 involving individual liability for owners and executives. 

The DOJ press release is available here.

Reporter, Isabella E. Wood, Atlanta, + 1 404 572 3527,

CMS Announces CMMI Milestones and Updates CMS recently announced updates and milestones for several programs run by the Center for Medicare and Medicaid Innovation (CMMI). CMMI is the internal CMS agency responsible for developing and testing new health care payment and delivery models, including implementation of the Quality Payment Program enacted as part of the Medicare Access and CHIP Reauthorization Act of 2015.

Next Generation Accountable Care Organizations (NGACO) Model

On January 10, 2020, CMMI posted the second evaluation report of the NGACO Model currently being implemented in 41 ACOs across the country.  Under this Model, NGACOs earn a share of savings from CMS for keeping Medicare spending for their beneficiary population below the benchmark and are required to pay a portion of the losses if spending exceeds those benchmarks.  The report, which looks at the first two years of the NGACO Model (2016 and 2017) found small but statistically significant reductions in gross Medicare spending (-0.6 percent) and a non-significant increase in net Medicare spending (+0.4 percent) after accounting for CMS's risk-sharing payouts to participating NGACOs.  The second evaluation report also found no statistically significant impact on acute care hospital spending or acute care hospital stays.  The report is available here.

Primary Care First Payment Model Options

CMMI released an FAQ on its Primary Care First (PCF) payment model options, a set of voluntary payment options for advanced primary care practices to encourage delivery and coordination of advanced care through primary care physicians and practices.  The PCF-General option is designed for primary care practices with advanced capabilities in exchange for flexibility and potential rewards based on performance.  A separate PCF option focuses on seriously ill patients, with payments to reflect the high-need, high-risk nature of the population. 

The PCF payment model options will be offered in the following 26 regions for a 2021 start date: Alaska (statewide), Arkansas (statewide), California (statewide), Colorado (statewide), Delaware (statewide), Florida (statewide), Greater Buffalo region (New York), Greater Kansas City region (Kansas and Missouri), Greater Philadelphia region (Pennsylvania), Hawaii (statewide), Louisiana (statewide), Maine (statewide), Massachusetts (statewide), Michigan (statewide), Montana (statewide), Nebraska (statewide), New Hampshire (statewide), New Jersey (statewide), North Dakota (statewide), North Hudson-Capital region (New York), Ohio and Northern Kentucky region (statewide in Ohio and partial state in Kentucky), Oklahoma (statewide), Oregon (statewide), Rhode Island (statewide), Tennessee (statewide), and Virginia (statewide). 

Practice and payer selections will take place in Winter-Spring 2020, and the model will begin in January 2021.  Applications for participation close on January 22, 2020.  The FAQ is available here.  Interested applicants can apply by registering on CMMI's application portal, which is available here.  

Direct Contracting Model Options

CMMI opened applications for its Direct Contracting Model Options. As previously reported, the Direct Contracting Model is a set of voluntary payment models that aim to lower costs and maintain or improve quality for Medicare fee-for-service beneficiaries through risk-based contracts.  There are currently two risk-sharing payment model options available for participation, which are the Professional Option and the Global Option. The Professional option is a lower-risk option with fifty percent shared savings/shared losses and a primary care capitation equal to seven percent of the performance year benchmark for enhanced primary care services. The Global Option is a full risk option with 100 percent shared savings/shared losses and either a primary care capitation or total care capitation. CMS plans to release more details on the third model, the Geographic option, at a later date.  

The application to participate in the Direct Contracting Model Options closes on Tuesday, February 25, 2020.  Information on Direct Contracting and the application process is available here

 Reporter, David Tassa, Los Angeles, CA, +1 213 443 4335,


Trump Administration Opposes Petition to Expedite Review of the Constitutionality of the ACA – On January 3, 2020, the House filed a petition for writ of certiorari asking the U.S. Supreme Court to review the Fifth Circuit’s decision to send the case challenging the Affordable Care Act (ACA) back to the district judge who struck it down as well as a petition asking the U.S. Supreme Court to consider its petition for writ of certiorari on an expedited timeline.  In a January 10, 2020 response, Solicitor General Noel Francisco states that “[t]he Fifth Circuit’s decision itself does not warrant immediate review because it did not definitively resolve any question of practical consequence.” A group of Republican states led by Texas filed a separate response urging the Court to deny the requests to expedite its review of the appeal, arguing that although “[t]he lawfulness of the [ACA] is undoubtedly a matter of the utmost national importance, … the current petitions do not justify immediate, emergency review by this Court” because Petitioners cannot show “concrete, irreparable harm” that will result if the case is reviewed in the ordinary course. Information regarding the January 3, 2020 petition filed by 20 states and the District of Columbia and the background of the case is available here.

King & Spalding Healthcare and Life Sciences Practices Named 2019 Practice Groups of the Year by Law360 – On January 12, 2020, Law360 announced its 2019 Practice Groups of the Year in which named King & Spalding LLP’s Healthcare and Life Sciences practices to the list.  A link to the Law360 announcement is available here.

 King & Spalding Washington Insight Webinar Series: Congress 2020: The Year Ahead

On January 30, 2020, from 12:00 PM ET to 1:00 PM ET, King & Spalding LLP will host the first in a series of webinars designed to provide participants with knowledge about what is happening in Washington. In Congress 2020: The Year Head, King & Spalding will provide an overview of what to expect in the current session of Congress, including:

  • U.S.-Mexico-Canada Agreement (USMCA)
  • Drug Pricing
  • Impeachment
  • Tax Reform
  • Big Tech and Privacy
  • 2020 Election

Join us for this interactive webinar and get early insights into what 2020 will bring from Washington. You do not need to be a client to attend, and there is no charge.  For more information and to register, please click here.